Income Volatility Research Articles

Childhood Income Volatility

Rising volatility in family income suggests that government efforts such as the monthly payment of the child tax credit may be appropriate.

Do Capital Structure Models Square with the Dynamics of Payout?

We explore whether theoretically the target leverage and pecking order models can be reconciled with payout smoothing. Investment absorbs a significant part of income and asset volatility if the firm follows both a payout target and a net debt ratio (NDR) target. A positive (negative) NDR amplifies (dampens) shocks in assets. Slow adjustment towards the NDR target facilitates payout smoothing. Under strict pecking order financing, income shocks are absorbed primarily by changes in net debt. More payout smoothing implies a stronger negative relation between debt and net income. Shocks to assets in place need not affect current payout.

Poverty and the Incidence of Material Hardship, Revisited

ObjectiveWe examine trends in seven types of material hardship, such as food and housing hardships, and how their incidence by poverty status changed over the 1992–2011 period.MethodWe use data from multiple panels of the Survey of Income and Program Participation and logistic regressions to examine these relationships.ResultsWe find declines in four of the seven hardships, with little change or moderate increases for the others. Declines were larger for hardships more dependent on longer term income flows, while those more sensitive to short‐term income fluctuations declined by less (or increased). Notably, declines in hardship were most evident among the lowest income groups over the period.ConclusionThat short‐term hardships did not decline suggests that income volatility poses an important challenge for many households. Larger declines in hardship among the lowest income groups suggest a greater underreporting of income over time and the presence of family resources not comprehensively counted in the official poverty measure.

Financial Reporting for Pollution Reduction Programs

We develop a conceptually grounded approach, based on the International Accounting Standards Board’s conceptual framework, to the accounting for the rights and obligations embodied in a cap-and-trade program. Under this approach, firms recognize allowances as intangible assets, initially measured at fair value with a credit to cash for purchased allowances and to a current period gain for allocated allowances; firms recognize current period expense and accrue liabilities, at fair value, as they emit; both asset and liability are remeasured at fair value at every reporting date. We apply our treatment and three alternative treatments, based on current practice and proposals considered by standard setters, to transaction-level data from the U.S. sulfur dioxide cap-and-trade program to calculate as-if financial statement outcomes using actual data. The alternative treatments result in noncomparable accounting for otherwise similar arrangements. To provide ex ante evidence on the effects of noncomparable accounting, we analyze reporting outcomes and show that alternative accounting treatments of the same arrangement result in meaningful differences in reported assets and liabilities, income volatility, and commonly used performance and leverage metrics. Because the financial reporting effects of noncomparable accounting are exacerbated by business combinations and plant-level purchases of allocated allowances that may have been initially recorded at zero, our analysis explicitly accounts for the effects of these transactions. Finally, we find that among the four accounting treatments we consider, reporting outcomes under our proposed approach are most aligned with investor perceptions, as indicated by the associations between the market value of equity and assets, liabilities, and income. This paper was accepted by Shiva Rajgopal, accounting.

Volatility of other comprehensive income and audit fees: evidence from China

Managers make numerous subjective judgments about other comprehensive income (OCI) due to the fair-value measurement, which increases the auditing risks and challenges for auditors. This study investigates the relationship between audit fees and the volatility of OCI in China using a large sample of Chinese A-share listed companies from 2014 to 2018. Such relationship cannot be confirmed for these companies, including those audited by Big 4 firms and the top 10 accounting firms in China, but is significantly positive for those audited by experienced auditors. Results indicate that audit firms in China generally do not seriously consider risks concerning the volatility of OCI. However, auditors with long tenures are more aware of these risks and have correspondingly higher prices compared with their peers.

Analysis of PT Aneka Tambang tbk During Covid Pandemic 19

This study aims to predict the performance of PT. Aneka Tambang Tbk during the Covid 19 conditions, as a consideration whether to maintain share ownership to continue investing in 2020. The research method used in this study is a descriptive study method. In this study the author used secondary data by taking PT Aneka Tambang, Tbk Financial Report published from 2015-Q32019. The result could be seen that the net profit margin of PT Aneka Tambang Tbk is low. It causes the company's net profit to be unstable. The decrease in sales it will impact PT Aneka Tambang Tbk’s net profit. The volatility of net income makes equity growth not very good. Besides that, the company has an ROE which is still below 10%, which illustrates the company is not very profitable. With the current condition of Covid 19, it is not the right time for shareholders to sell their shares. The author's view is that shareholders should still hold the shares of PT Aneka Tambang Tbk in the hope that nickel prices will increase and will give a positive response to the company. Therefore, shareholders can consider continuing to invest in the long term.

영업현금흐름, 세무이익 변동성과 기업위험

영업현금흐름, 세무이익 변동성과 기업위험

Growth volatility and income inequality: asymmetric analysis for France

The present study attempts to investigate the growth volatility and the income inequality association for one major OECD country of the European Union, namely France over the period 1970-2016. The paper adopts empirical time series techniques. The paper applies the nonlinear ARDL method of Shin et al. (2014) because this will enable to find the asymmetries in the relation. It is argued that the rate at which income inequality reacts to rising income volatility may not be equal to the degree of responsiveness to the decline in the volatility of income. The hypothesis of positive asymmetric impact of economic growth on the top income shares is empirically established in this analysis. The paper makes a novel attempt to study how inequality is impacted by growth volatility in France by adopting an asymmetric framework. A series of robustness measures have been adopted to check for the consistency of the approach.

Ties that bind? Family income dynamics and children’s post-secondary enrollment and persistence

We examine the relationship between family income dynamics—poverty, low permanent income, and income volatility—and high school graduation, college enrollment, and dropout among young adults using the Transition to Adulthood supplement of the Panel Study of Income Dynamics. Our intent is to shed light on potential mechanisms driving the transmission of intergenerational advantage to help understand whether and how such income dynamics have played a role in the persistent gap in college achievement. We find that poverty and income volatility during adolescence is related to near term educational outcomes of high school completion and college enrollment. Some of this relationship is mediated by household instability coinciding with poverty. It also apparent that the timing of poverty spells during adolescence is vital. Poverty occurring close to the end of high school drives has relatively large deleterious effects on educational attainment.

Impact of Acquisition on cost efficiency, operational hedging and returns of acquirer firms in Pakistan

The current study is aimed at checking the impact of the acquisition on the various short-run and long-run firm characteristics like abnormal returns, cost efficiency, and operational hedging of acquirer firms. Results have been analyzed for Pakistan Stock Exchange for a period of 2006 to 2019. The acquisition may signal the future prospects of both acquirer and target firms. The event study technique indicates the significant abnormal returns after 3 days of the acquisition announcement. However, pre-event statistics indicate abnormal returns for 5 out of 7 days before acquisition announcement. Researchers have calculated the cost efficiency scores for bidding firms three years prior to the acquisition and three years post-acquisition. Overall results suggest an improvement in the efficiency of the financial firms' overtime period. The non-financial sector is indicating opposite results where most of the firms are showing a declining trend in efficiency after the acquisition. Next, the impact of the acquisition on the operational volatility is checked. The empirical results have shown a large level decrease in the operational income volatility after the takeover deal. It shows that combined firms after acquisition brings the benefit of diversification thus reducing volatility and increasing operational hedging which may ultimately reduce financial hedging. The findings of the study may help regulators as well as acquiring companies to know the potential effects of the acquisition announcement.

Revisiting hope’s third pillar: Mattering, spirituality, and social connectedness among financially marginalized households

ABSTRACT While hope is an established strength within the catalog of positive psychology virtues and a theoretically established concept in economic development (Lybbert & Wydick, 2018), little applied research has considered the role of positive social institutions in maintaining hope under duress, especially among financially marginalized populations. Mattering is a social-psychological construct defined as an awareness that we are a significant part of the world around us (Elliott, Kao, & Grant, 2004). The authors tested the relationship between hope, spirituality, and three-dimensions of mattering (awareness, importance, and reliance), with adults experiencing income volatility while participating in an urban economic mobility intervention. Results indicate that subjects experiencing economic marginalization were more hopeful when they felt others chose to rely on them, even after taking personal spirituality into account. These findings suggest the importance of relationships and specific types of social connectedness in the expression of hope for economically marginalized individuals.

ECONOMIC VIABILITY OF DAIRY FARMS IN SELECTED EUROPEAN UNION COUNTRIES

The aim of the study was to assess the economic viability of farms specializing in dairy cattle breeding in countries with the highest share of milk production in the EU. Viability was measured using two models based on the opportunity cost of unpaid labour and equity. The study used a comparative analysis of farm viability indicators calculated on the basis of data collected in the FADN system in 2008-2017, taking changes in income in the short and long term into account. The research indicates that farms with greater economic potential were characterized by higher economic viability. Italian and Polish farms with an economic size of EUR 100,000-500,000 were considered viable and developing, as well as Italian and German farms from the group of over EUR 500,000. British and French farms were characterized by a lack of viability. The results were largely influenced by differences in the level of average wages in the national economy of the analysed countries, inputs of unpaid labour and the level and volatility of income.

Does reporting position affect the pricing of the volatility of comprehensive income?

AbstractThe FASB changed the reporting policy for comprehensive income (CI) by issuing ASU No. 2011‐05, which requires CI be reported in performance statements (i.e., either a single income statement with net income or a separate statement of CI following the income statement) rather than the previously allowed equity statements. We examine whether the change in reporting position of CI led to higher market pricing of CI volatility incremental to NI volatility (“incremental CI volatility”), as measured by the price‐earnings relationship. We find that the market pricing of incremental CI volatility increased from the pre‐ to the post‐ASU period for non‐financial firms forced to change the reporting position of CI from equity to performance statements. The increase is more prominent for firms that switched to the income statement than for firms that switched to a separate statement of CI. Further, we find that the increased market pricing of incremental CI volatility translates into lower valuation weights on other comprehensive income.

A latent class analysis of multifaceted economic experience and socioemotional well-being of children of immigrants.

Developmental studies have consistently argued for consideration of contextual influences on children's socioemotional well-being. This is particularly true among children of immigrants, who have highly diverse social, cultural, and economic backgrounds. Using the Early Childhood Longitudinal Study-Kindergarten, this study disentangled the variation of socioemotional well-being among children of immigrants in the United States by looking at country of origin and their multifaceted economic experiences. The study first examined the economic lives of children of immigrants by conducting a latent class analysis with 3 dimensions-depth, duration, and income volatility from kindergarten to fifth grade. It further investigated how multifaceted economic experiences shaped the socioemotional perceptions of children of immigrants by considering country of origin. Findings from this study support both the immigrant risk and immigrant paradox perspectives, depending on country of origin, patterns of economic experiences, and the examined socioemotional domain. Children of immigrants generally perceived themselves to have a worse locus of control, self-concept, and internalizing symptoms at eighth grade than their peers of native-born parents. After considering the economic circumstances of these families, the picture was no longer straightforward. Children of South East Asian and East Asian origins reported worse socioemotional well-being than their White peers of native-born parents in chronic near-poor circumstances. Otherwise, most children of immigrants fared as well as their White children of native-born parents under similar economic conditions. Findings underscore the importance of country of origin and economic experiences in accounting for the variations of socioemotional well-being among children of immigrants. (PsycInfo Database Record (c) 2020 APA, all rights reserved).

Trade Volatility in the Association of Southeast Asian Nations Plus Three: Impacts and Determinants

This paper investigates trade volatility in the Association of Southeast Asian Nations Plus Three (ASEAN+3) and its links with output volatility, export diversification, and free trade agreements. To achieve this research objective, we apply several econometric estimators to data from all ASEAN+3 member states over the period 1990–2016. We first find evidence of a positive relationship between output volatility and trade volatility. Second, we reveal that the way export diversification is measured can influence its impacts on bilateral export volatility. Moreover, the relationship between income volatility, trade volatility, and export diversification seems to depend on country size and the level of economic development.

Poverty Reduction Effect of Adaptation to Climate Change: Empirical Evidence from China’s Loess Plateau and Qinba Mountains

Based on the micro-survey data of rural households in China’s Loess Plateau and Qinba Mountains, this paper empirically examines the poverty reduction effect and mechanism of adaptation to climate change. The research conclusions show that the adaptation actions can significantly reduce the poverty vulnerability of farmers, especially the future incidence of poverty in agricultural or poor households to a greater extent, which is characterized by a “pro-poor” effect. Adaptation actions can reduce poverty from two aspects: decreasing the expected income volatility (loss mitigation effect) and increasing the expected income level (opportunity effect), and the former is stronger than the latter. In the post-2020 period, China should enhance policy support in rural areas to adapt to climate change, improve the resilience of farmers’ livelihoods and climate change resilience of rural areas, and promote sustainable poverty reduction.

From me to us: Strengthening our Financial Capabilities

For low‐income or precariously employed households in Australia, the re‐allocation of risk over the past forty years has four crucial economic dimensions: the fraying of the social security net; changes in labour market dynamics; heightened uncertainty arising from income volatilities; and new hazards generated by the financialisation of daily life. Household financial capabilities are negatively influenced by the compounding impacts of each of these risks. Case examples from a BSL study illustrate each impact and their interactions. The dominant idea that individual capabilities are malleable (and thus can be optimised) whilst circumstances and norms are fixed is countered by an expanded view of Sen’s/Nussbaum’s capability approach (CA) that includes collective capabilities. Collective capabilities can change norms, and so, the concept provides a needed link between the political and macroeconomic movement of risk re‐allocation and individual or household financial capabilities. The Australian Unemployed Workers’ Union is used as an example to show how collective action can challenge structural conditions, and expand or protect the capabilities of individuals.

Risk Shifts in the Gig Economy: The Normative Case for an Insurance Scheme against the Effects of Precarious Work*

Risk Shifts in the Gig Economy: The Normative Case for an Insurance Scheme against the Effects of Precarious Work*

Agricultural Households: An Exploratory Analysis Revisiting Financial Position and Well‐being in Australia*

As the issue of agricultural household economic well‐being begins to resurface, we use custom data sets to compare the financial position of agricultural households to the general Australian population. We find that agricultural households tend to have higher levels of wealth compared to households in the average Australian population, yet experience more income volatility on average. Our study brings attention to the important well‐being issue while also highlighting the need to collect robust farm household data in order to better understand the complex dynamics of household well‐being in the Australian agricultural sector.

Impact of off-farm income and paid taxes on the composition and volatility of incomes and wealth of dairy farmers in the Netherlands

This paper analyses the composition and volatility of the total income and wealth of dairy farmers and the importance and volatility of the different components contributing to their total income and wealth based on Dutch FADN data. The results confirm some existing findings on the stabilising impact of CAP subsidies and off-farm income on farmers’ total income. The paper extends the existing analyses by exploring the impact of taxes on income volatility and the important role of savings in stabilising consumption of farm households. In this paper we show that a broader perspective (including off-farm income and wealth) provides a more realistic picture of the income and wealth effects as experienced by farmers.